MultiFamily Property zoned as single family

[Mariana Hernandez]

We have been under contract for a Four-plex  but after the appraiser came out to see property he mentioned house was never zoned for multi family. It has all utilities separated, as well as entrances, etc. Now lender is saying it can't fund the deal because zoning is not correct. Our agent is saying we could try to get funding as a single family and then get it switched afterwards. 

Any ideas on how to fix this? 

[James Masotti]

@Mariana Hernandez - Depending on the regulations in the area you live it is like @Steve Bracero said, you may need to get a non-conforming use permit. This is a major issue where I invest because the City has been hitting hard on trying to get these converted back to single family homes, so there is an ordinance that after a year of vacancy a property loses its nonconforming use and you have to reapply with the Zoning Board, who usually denies your request. For this reason I also ask the seller how long the property is vacant and for proof of nonconforming use permit before looking at a property not zoned as multi-family. (Here's a quick hint...most don't have this so I don't buy them) 

Also it will depend on if you are getting a loan in your personal name (ie likely to be conforming to federal lending guidelines as mentioned by @James Kojo) then its likely they will have a lot more restrictions. if you're getting a commercial loan because you're buying under your LLC then likely they wont care about things like this as long as the asset appraises and cashflows to their lending guidelines.